Calculating Profit & Loss for Cross Pairs
Each AUD/JPY unit is 100,000 Australian dollars, each EUR/JPY units is 100,000 euros, and each GBP/JPY unit is 100,000 pounds.
MG's dealing desk will be quoting a 5 pip spread for EUR/JPY, a 7 pip spread for AUD/JPY, and an 8 pip spread for GBP/JPY**
The actual profit and loss (P/L) for these cross-pairs is computed in Yen; however, the DealStation™ will automatically convert the P/L to US Dollars based on the USD/JPY exchange rate at the time you close your position.
Below is the formula used to calculate the P/L for a AUD/JPY cross trade:
Example #1:
If a trader Buys 1 unit of AUD/JPY at 72.13 and closes the position at 72.20, the P/L will be calculated as follows:
Value of the position at the opening price of 72.13 = 100,000 x 72.13 = 7,213,000 Yen
Value of the position at the closing price of 72.20 = 100,000 x 72.20 = 7,220,000 Yen
P/L in Yen = 7,220,000 - 7,213,000 = 7,000 Yen
The DealStation™ platform will convert your P/L into USD, using the current USD/JPY rate.
The conversion is performed as followed:
To convert the JPY profit into USD, simply divide the number of Yen gained by the USD/JPY rate at the time the position was closed:
Since you're selling the JPY you made, (and buying USD), use the ASK USD/JPY price for this conversion:
USD/JPY (ASK rate) at the time of closure = 120.36
P/L in US dollars: 7,000 JPY / 120.36 = $58.16
Keep in mind that you should multiply the P/L in USD terms by the number of units in your trade. Therefore, in the example above, if you were trading 5 units of AUD/JPY, your $P/L would in fact be ($58.16 x5) = $290.80
Note:
Since each EUR/JPY unit is 100,000 Euros, each AUD/JPY unit is 100,000 AUD, and each GBP/JPY unit is 100,000 GBP, then each pip is worth 1,000 JPY.
For $USD terms, divide the number of Yen difference (in this case 1,000) by the prevailing USD/JPY price (in this case 120.36) and you get 1,000/120.36 = $8.31
EUR/JPY = 100,000 EUR x 0.01 = 1,000/120.36 = $8.31.
AUD/JPY = 100,000 AUD x 0.01 = 1,000/120.36 = $8.31.
GBP/JPY = 100,000 GBP x 0.01 = 1,000/120.36 = $8.31.
Please note that the converted USD per-pip value will depend of the USD/JPY rate at the time the cross-pair position was closed.
Here is an example that shows how to calculate P/L of a EUR/JPY trade:
Example #2:
If a trader Buys 1 unit of EUR/JPY at 129.65 and closes the position at 129.60, the P/L will be calculated as follows:
Value of the position at the opening price of 129.65 = 100,000 x 129.65 = 12,965,000 Yen
Value of the position at the closing price of 129.60 = 100,000 x 129.60 = 12,960,000 Yen
P/L in Yen = 12,960,000 - 12,965,000 = (5,000 Yen)
The DealStation™ platform will convert your P/L is USD terms, using the current USD/JPY rate.
The conversion is performed as followed:
To convert the JPY loss into USD, simply divide the number of Yen lost by the USD/JPY rate at the time the position was closed.
Since you're buying the JPY you lost, (and selling USD), use the USD/JPY BID price for this conversion:
USD/JPY (BID rate) at the time of closure = 120.40
P/L in USD terms: (5,000 JPY) / 120.40 = (approx. $41.53)
Keep in mind that your account's Status Report will feature the conversion rate in the "Conv. Rate" column. You do not need to perform the calculations shown above since you can see your P/L directly on the DealStation™ platform.
Your margin calculation will be performed using the same conversion method described above.
Your account's margin requirement will be the same for trading the Majors as it will be for trading the AUD/JPY, EUR/JPY, and GBP/JPY crosses.
**Note: MG reserves the right to increase its spread during adverse market conditions.
If you have any questions about Cross Pair trading, or the calculations above, feel free to Contact Us.
